Real Estate Dictionary

A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).

The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year.

Repayment of a loan in installments of principal and interest, rather than interest-only payments.

The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.

An estimate of the property’s value.

A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

A lump sum principal payment due at the end of some mortgages or other long-term loans.

Sometimes known as an offer to purchase or an earnest money receipt. A binder is the acknowledgment of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.

Permanent—prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary—prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows.

The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.